Many Don't Benefit From Tax Break

Restrictions Can Render Florida's New "Granny Flats" Law Unusable.

Jim Hammock is learning the hard truth about tax-break legislation designed to help thousands of Floridians who bring their parents or grandparents into their homes.

When a state constitutional amendment was passed in 2002 creating the property-tax exemption, Hammock made certain that he would build his new house with space for his folks.

But financial restrictions, strict qualifying rules and reluctance by some government officials to embrace the law mean many homeowners are not able to benefit from the so-called "granny flats" amendment.

Only a dozen or so counties, including Seminole and Volusia, have adopted the exemption. Lake County rejected it. Orange and Osceola counties have not addressed it.

What is clear is that the number of people who could benefit from the tax break is substantial. In Florida, more than 106,000 people older than 65 live with their children, according to the 2000 U.S. census. In Central Florida, more than 16,500 fit the category.

Seminole County Property Appraiser Bill Suber is taking an aggressive approach to put granny flats in place locally and to educate property owners about what qualifies and what doesn't.

For example, property owners need to understand that the tax relief is only for people who build onto or modify their homes. Simply moving Grandma into an existing spare bedroom doesn't cut it.

Another limitation has to do with the amendment's effective date. Although the amendment passed in November 2002, it didn't take effect until Jan. 7, 2003. That means additions built before the effective date don't qualify.

There are other caveats. The tax relief applies only to the modified space or new construction and only up to 20 percent of the value of the existing house.

For example, the owner of a $100,000 house won't get tax relief beyond $20,000 on the home's value, even if the addition costs more. The threshold may make it impractical to modify more-modest homes.

At the other end of the spectrum, major additions could be tacked onto high-priced homes and qualify for huge tax breaks.

Granny-flats critics, such as Lake County Property Appraiser Ed Havill, point out that every exemption granted under the amendment increases the tax burden on other property owners. The legislation doesn't do enough to limit who can benefit from it, Havill said.

"The parent doesn't have to be a Florida resident," he said. "Social Security numbers are not required, so we can't verify residency or check to see if they have other homestead exemptions in the state."

The system in its current form is ripe for abuse, yet the penalties are less than fines for some other exemption violations, he said. Granny-flats violators can be fined up to $1,000 and are banned from applying for the exemption for five years. Lying about a homestead exemption, by contrast, can net up to a $5,000 fine and up to a year in prison.

Havill had little trouble convincing the Lake County Commission that the granny-flats break is a bad idea. The commission declined to adopt the tax break in September.

But Suber's view is that voters approved the measure by a 2-1 ratio, so he must make it work. That means his staff will have to do more detective work than ever before to ensure that people qualify. But he concedes there are problems.

"The constitutional amendment was well-intentioned, but there is a lot that remains unclear," he said.

The state Department of Revenue, which is in charge of overseeing the exemption being implemented, has a committee reviewing it and is expected to make recommendations on changes to the Legislature this spring, Suber said.

Until then, Suber and his staff urged property owners who are interested in granny flats to plan. For example, any addition must meet all city and county codes and be permitted in order to qualify for the exemption.

Meanwhile, Hammock and others who want granny flats to work are watching and waiting.

"As usual with a lot of stuff the Legislature does, the intent of the law is always clashing with the letter of the law," he said.

A stumbling block for Hammock is that his father is listed as part owner of the house. Hammock said he added his father's name to the deed to give him peace of mind that he wouldn't be kicked out if Hammock were to die before him.

That doesn't qualify under granny flats. The elderly parent or grandparent cannot have ownership in the home. So, to qualify for the exemption, Hammock must remove his father from the deed.

"So, now I'm going to have to pay a lawyer to modify the mortgage and modify my will," he said.